Cineworld Group 2019 was a solid year

Cineworld Group plc (LON:CINE) has today announced its final results for the year ended 31 December 2019. The comparative period includes the ten months results of Regal Entertainment Group following the completion of its acquisition on the 28 February 2018. These results are presented in US Dollars.

Financial Highlights

• Group revenue of $4,370m (2018 Pro-forma(2): $4,657m) softer as expected compared to 2018, predominantly due to the strong comparative film slate
• Group Adjusted EBITDA of $1,033m (under IAS 17(1)) (Pro-forma 2018(2): $1,072m) and 23.6% margin, up 80bps
• Integration benefits from Regal exceeded initial expectation, with estimated run-rate synergies at the time of the acquisition increasing from $100m to $190m
• Reduced Net debt(3) to $3.5bn (excluding leases) from $3.7bn at 31 December 2018 and $4.0bn at the time of the acquisition of Regal
• Declared full year dividend of 15.5 cents up 3.3%

Operational Highlights

• Successful launch of our Unlimited program in the US in July 2019 – generating positive impact on cash flow, market share and box office performance
• Regal refurbishment and integration programme progressing well with two sites completed in 2019. Further 20 sites to be completed in the next 12 months. We have also closed 16 sites in the period which has impacted the results against the comparative.
• Continued investment in optimising the customer experience and cutting-edge technology with more ScreenX and 4DX screens, enhanced food offerings, bars and launch of “Lavazza Coffee Joints” in the US

Outlook

• Solid box office performance year to date with compelling film slate scheduled for 2020
• There can be no certainty as to the future impact of COVID-19 on the Group, however we are taking measures to ensure that we prepare our business for all possible eventualities. We have highlighted the potential impact this could have on the Group within our going concern statement in this document
• Management expects further market share gains and increased Unlimited members in the United States
• Proposed acquisition of Cineplex Inc, leading Canadian cinema chain, for $2.3bn expected to complete in the first half of 2020 following receipt of strong shareholder approval. Acquisition expected to deliver $130m of synergies with Group leverage to be reduced towards 3x by end of 2021
• Revenue decreased by 6.2% on a pro-forma basis from 2018 basis due to the strong comparative film slate and closure of loss making sites in the US.
• US pro-forma(2) revenue decrease of 9.0%;
• UK & Ireland constant currency(2) revenue decrease of 2.7%; and,
• Rest of the World constant currency(2) revenue increase of 10.0%.
• Completed two sale and leaseback transactions for total proceeds of $556.3m relating to 35 US-based sites, half of the proceeds used to reduce gross debt and the other half to reward shareholders by way of a one-off special dividend of 20.27 cents per ordinary share ($278.1m)

Key Financial Information

1. From 1 January 2019, the Group has adopted IFRS 16 “Leases”, applying the modified retrospective approach. To provide comparability of the underlying results year on year, the results have also been presented excluding the impact of IFRS 16 and have been prepared in accordance with the previous leasing standard IAS17. A reconciliation of the IFRS 16 2019 results to IAS 17 is provided in the Chief Financial Officer’s Review.
2. Pro-forma results reflect the Group and US performance had Regal been consolidated for the entirety of the comparative period from 1 January 2018 to 31 December 2018. Revenue is shown on a constant currency basis for the UK&I and the ROW reporting segments by applying the 2019 average exchange rates to the 2018 performance. Refer to Note 3 for the full reconciliation.
3. Refer to Note 3 and Note 6 for the full definition and reconciliation.
4. The 2018 Adjusted Basic Earnings Per Share and adjusted diluted Earnings Per Share has been restated as detailed in Note 1.

Anthony Bloom, Chairman of Cineworld Group plc, said:

“2019 was a solid year for Cineworld, a year in which over 275 million customers watched movies on our screens, adjusted EBITDA exceeded a billion dollars, the synergy expectations in the Regal acquisition were virtually doubled in a well handled integration exercise, net debt was reduced and the dividend increased. I consider that to be a successful year. In the future, the Group will be well positioned to capitalise on our scale as the second largest cinema chain in the world, our deep experience and wide geographic diversification.

It is thus ironic that these achievements should be overshadowed by the negative impact of the global COVID-19 crisis, even though that at the time of writing the Group’s operations have not been affected to a material degree. I am of course conscious of the possibility that events could develop adversely very quickly and change this position in the short term, but I remain confident that the crisis will ultimately pass and that the cinema exhibition industry will continue to play a major role in providing fun, laughter, happiness and joy to millions of dedicated movie fans, just as it has for over a century”.

Commenting on these results, Mooky Greidinger, Chief Executive Officer of Cineworld, said:

“Cineworld has delivered a solid set of full year 2019 results despite 2018 being a very strong comparative period. In particular, I am proud of our integration with Regal which continues to progress well. The refurbishment plan is on track, our “Unlimited” subscription plan was successfully launched in July 2019, we’ve upgraded our synergy target to $190 million from $100 million and Union Square in New York is due to open in the coming weeks. This gives us confidence in our ability to achieve our synergy target for the proposed transaction with Cineplex Inc, which we expect to complete in the first half of this year having received overwhelming universal support from shareholders.

We remain committed to our long-term strategy and vision to be “The Best Place to Watch a Movie”. Throughout our global estate, our cinemas offer cutting edge formats and technologies, such as ScreenX and 4DX; products from the likes of Starbucks and PepsiCo that are favoured by consumers; and staff that are amongst the most experienced and loyal in the industry. Our strong cash generation also allows us to focus on deleveraging whilst delivering returns to shareholders.

We are closely monitoring the evolution of COVID-19 and so far, we have seen minimal impact on our business. However, there can be no certainty on its future impact on our activities, hence we are taking measures to ensure that we are prepared for all possible eventualities. Should conditions relating to COVID-19 continue or worsen, we have measures at our disposal to reduce the impact on our business including, but not limited to, capex postponement, cost reduction, in order to maintain cash liquidity, however we have highlighted the potential impact this could have on the Group within our going concern statement. Nevertheless, we are excited by upcoming films for 2020 which includes ‘Black Widow’; ‘Wonder Woman 1984’; ‘Top Gun Maverick’; ‘Minions: The Rise Of Gru’; ‘Tenet’; ‘Venom 2’; the latest James Bond ‘No Time To Die’; ‘Godzilla vs. Kong’; ‘Dune’; ‘West Side Story’ and many more”.